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The Italian Industrial Districts: evolution and features Global and Local Development Regional Economic Policies 2014/2015 Professor Cristina Brasili Global and Local Development Regional Economic Policies 2014/2015 Professor Cristina Brasili

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In Italy endogenous growth theorists focus on the role played by the Small and Medium Enterprises (SME) and especially, the local economic systems they engender - i.e. the industrial districts Why is that so? Signorini in Lo sviluppo locale (2000) names it the “Structural Paradox of Italy”, that is: an industrial basis made up of micro and small enterprises specialised in traditional sectors A sharp North-South Dualism differentiating the socio-economic system of North from that of the South of Italy Production mostly at low-technological and low-capital content Endogenous Growth Model

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The Industrial Districts (IDs) In the Principles of Economics (1919) Marshall wrote that an area with a high concentration of small firms can be defined as district when: production is flexible. Firms in the district make the most of efforts to meet the clients’ needs; when dealing with wholesalers strive to produce the whole selection of products required by these clients; there is a concentration of flexible small and medium firms in particular localities; some of the small and medium firms operating in the district sell directly on the market, while other produce intermediate products that are functional to the final production of the district; there is no strict distiction between firms producing final products and other producing intermediate components; a firm can be both producer of final products for some of its production and subcontractor for other production; cooperation and competition are intertwined in the district; firms tend not to compete, rather make efforts to ensure a slice of the market for themselves without having disruptive effects on other fir s and within the district; the district is embedded in small area characterised by a core production; there is a strong interdependence between the district’s performance and activities and the social and economic life of the geographic area where it is located.

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From the Marshall’s definition of the District ……... To the synthetic definition of Becattini (1990), “a social and territorial entity that is characterized by the active presence of both a community of people and a group of enterprises in a natural and historically determined area” The Industrial Districts (IDs)

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The decline of large enterprises in Italy (% of employment in large enterprises) Source: Censimenti Istat

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Industrial Districts in the Italian Economic Development (Giacomo Becattini ) One key feature of the Italian industrial system The industrial specialization of the Italian industry is not centered on high technology and capital intensive industrial sectors rather on sectors with high levels of know-how, design, “creativity” and low and medium technological content. e.g. furniture, shoes, leather, fur, jewelry, etc. In this way Italy faces high competition from both emerging markets and industrialised countries. The Industrial Districts (IDs)

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First mapping of the Italian Industrial Districts: higher presence in the North, at an early stage of development in the South, only a few in the Centre of Italy No sectorial analysis available. Three types of prodution: Personal Durable goods (related to “materie prime”) Home Durable goods (home appliances and equipment) Food Products and machineries related to food production Industrial Districts in the Italian Economic Development (Il Sole 24 ore, 1992 ) The Industrial Districts (IDs)

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“Made in Italy” e distretti industriali (Becattini, 1998 ) It is an answer at the specialised demand The production “Made in Italy” realized in the districts is of two types: the production of final consumer’s goods and the production of machinery and intermediate products connected to the realization of the final products. The Industrial Districts (IDs)

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See More: Luigi Burroni Carlo Trigilia (2001), Local Production Systems in Europe: Rise or Demise?, Oxford University Press,2001 Territorial organisation and changes in the 1990s: Industrial districts face the globalisation; what the effects? Has Globalisation pushed towards a progressive de-localisation of production? Three possible answers: 1.De-localisation of production towards low-cost markets 2.De-localisation of some stages of the production 3.Some of the more traditional districts become “tertiary districts” asprovide collateral services and perform supporting activities, while the production goes outside the borders of the country. The geographic concentration of production remains important also in the 1990s despite the globalisation The Industrial Districts (IDs)

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Local Labor Systems (2001 Census) L’Istat released information on the Local Labor Systems that had been classified and defined thatnks to a methodology that measures the daily movement of people between the place of resience and one other specific place (data provided by the 14 th Population Census). It has just been completed the 15 th Census of the Industry, whose data have been just recently made available. The Industrial Districts (IDs)

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Increasing relevance of economic territorial analysis but not of SME’s. In Italy in 1991 we have the recognition of ID Article 36 Law 317. 21 April 1993 there was an executive decree defining the variables for the identification of the IDs. The law and the decree are based on the Marshallian definition of Ids. The identification of the district it isn’t a mechanical process Before of the contemporary application of the five criteria it needs the analysis of the regional and national territory. Italian Districts’ regulation

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Article 36 Law n. 317 1991. April 1993 executive decree law 317, identification of the districts: Reference parameters for the Regions: Istat Labour Local System: one or more in which there is verified contemporary: An employment manufacturing index more then 30% of Italian one; The IDs in Italian law

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Entrepreneurship rate in terms of Local Units more then Italian average; Productive specialisation in a sector of activity in terms of employments respect to the employments in the total manufacturing sector more then 30% of the same Italian rate; A level of employment in the manufacturing specialisation activity more then 30% of the manufacturing employment in the considered area; A rate of employment in the SMEs in the specialisation area more then 50% of employment of all the enterprises in the considered area The IDs in Italian law

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The law “Norme in materia di attività produttive” (Article 6.8) 1999 May 11 gets trough the 5 parameters to identify the IDs. The Regions could be define the local productive systems where is a relevant concentration of enterprises and IDs the local productive systems with high productive specialisation. The IDs in Italian law

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The Italian economist Sylos Labini: Italy needs a reform of IDs. In 2005 he developed and published in the “Sole 24 Ore” newspaper a draft law. The IDs in Italian law

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One may wonder whether and how is possible to recreate industrial districts in other areas, so that to export this “model” to other contexts. Is this a viable policy ? Although firms embedded in industrial districts (IDs) have demonstrated to perform better than others outside them, still the IDs are not an economic miracle. So far it has not been discovered a unique, well-defined and reproducible mechanism able to engender the IDs.. The law 317/91 set out various types of support for the IDs – for the most, it stays at the Regions the responsibility to provide such forms of support. In Italy there are a number of instruments and contributions given to small firms. This system has contributed to exacerbate the structural characteristic of the Italian industrial structure – that is its hig fragmentation. In this socio-economic context local authorities play a fundamental role a properly designed regulatory framework alone is not sufficient (Source: L.F. Signorini in Lo sviluppo locale, 2000) A policy for the industrial districts, is it feasible?